Under a consent decree announced by the FCC last Friday, AT&T agreed to pay $7.75 million to settle an agency investigation into allegations that the carrier allowed a pair of third-party firms to bill AT&T customers an average of $9 per month in fraudulent directory service charges. The forfeiture by AT&T includes $6.8 million in customer refunds plus a civil penalty of $950,000 to be paid to the U.S. Treasury.
Cramming is the practice of adding third-party charges to phone bills without the consent of subscribers, and Friday’s consent decree concludes the FCC’s second cramming-related probe to involve AT&T in the past two years. (In 2014, AT&T agreed to pay $105 million in fines and consumer refunds connected with unauthorized third-party charges for premium text message services.) The latest investigation by the FCC’s Enforcement Bureau (EB) revealed that Discount Directory, Inc. (DDI) and Enhanced Telecommunications Services (ETS) requested billing to AT&T for “thousands of unbillable numbers” which included (1) numbers not associated with AT&T accounts, (2) numbers with third-party billing blocks, and (3) numbers for coin-operated pay phones that were not in service. According to the EB, fraudulent charges from DDI and ETS began appearing on AT&T subscriber statements “as early as 2002” and continued through May of 2015.
A Drug Enforcement Administration (DEA) investigation into principals of DDI and ETS uncovered questionable billing practices that were reported to the EB in March 2015. Upon learning of the DEA probe, AT&T terminated its relationship with DDI and ETS in April 2015. Nevertheless, the EB found that DDI and ETS had “submitted additional charges to AT&T following that date, which led to the inclusion of some third-party charges on consumer bills through May 2015.”
According to the EB, the consent decree “does not constitute a legal finding regarding AT&T’s compliance or noncompliance with any law.” In addition to the refunds and civil penalty, AT&T has also agreed to terminate all third-party billing services (with certain exceptions) and implement a compliance plan that will be overseen by a designated compliance officer. Declaring, “a phone bill should not be a tool for . . . unscrupulous third parties to fleece American customers,” EB Chief Travis LeBlanc told reporters that “AT&T customers . . . will enjoy greater protections against unauthorized charges on their phone bills in the future.”